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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
)
Ryder Communications, Inc., )
) File No. EB-02-MD-038
Complainant, )
)
v. )
)
AT&T Corp., )
)
Defendant. )
MEMORANDUM OPINION AND ORDER
Adopted: July 3, 2003 Released: July 7,
2003
By the Commission:
I. INTRODUCTION
1. In this Memorandum Opinion and Order, we deny a formal
complaint1 that Ryder Communications, Inc. (``Ryder'') filed
against AT&T Corp. (``AT&T'') pursuant to section 208 of the
Communications Act of 1934, as amended (``Communications Act'' or
``Act'').2 In particular, Ryder has failed to prove that AT&T's
enforcement of the early service termination provision contained
in the parties' contract tariff for 900 transport service was
unjust and unreasonable under section 201(b) of the Act.3 This
conclusion rests on the principle that where two parties, through
valid contracts, have clearly allocated the risk of certain
events, it is not unjust and unreasonable under section 201(b)
for one party to hold the other party to this contractual
allocation.
II. BACKGROUND
II.A. The Parties
2. During its existence as a going concern, Ryder was a
``service bureau'' and a 900 pay-per-call provider of information
services to marketers and media companies.4 AT&T is a national
and international provider of telecommunications services, as
well as a provider of transport services for 900 number calls.5
During the period covered by the Complaint, AT&T also provided,
in addition to tariffed telecommunications services, certain non-
tariffed services, including billing and collection services.6
II.B. The Parties' Business Relationship
3. In 1992, AT&T began providing 900 transport service to
Ryder for Ryder's 900 pay-per-call operations.7 From 1992 until
1997, AT&T provided this 900 transport service to Ryder pursuant
to AT&T Tariff F.C.C. No. 1 (``Tariff No. 1'').8
4. In January 1997, AT&T and Ryder entered into a
contract, also referred to as a Custom Offer Agreement, under
which AT&T agreed to provide 900 transport service to Ryder for a
period of three years at discounted usage rates based on Ryder's
volume of 900 calls.9 In exchange for these volume discounts,
Ryder agreed to meet certain prescribed ``Minimum Annual Revenue
Commitments (``MARC''),'' regardless of whether it actually
incurred sufficient volume to generate such revenue in usage
charges.10 Specifically, Ryder agreed to a minimum commitment
to AT&T of $600,000 in 900 transport service usage charges per
year for three years;11 Ryder also agreed with AT&T that, in the
event Ryder discontinued service prior to the expiration of the
three year term, AT&T could charge Ryder an early service
termination fee in ``an amount equal to 100% of the unsatisfied
MARC for each year remaining in the Custom Offer Agreement
term.''12 Ryder further agreed with AT&T that the early service
termination provision in the parties' contract would supercede
the early service termination provision in Tariff No. 1.13 In
addition, the parties agreed to incorporate the limitation of
liability provisions in Tariff No. 1,14 under which AT&T remained
liable for damages caused by any willful misconduct in its
provision of tariffed services.15
5. AT&T filed the parties' contract with the Commission as
Contract Tariff No. 6831 (``CT 6831'').16 CT 6831 became
effective on April 15, 1997.17
6. In addition to 900 transport service, AT&T also
provided billing and collection services to Ryder pursuant to a
billing services agreement executed by both parties, effective as
of January 1995 (``Billing Agreement'').18 Under the Billing
Agreement, AT&T agreed to obtain usage records for calls placed
to the 900 numbers served by Ryder, to bill the calling party for
such calls at the charges established by Ryder, to collect
payment from the callers, and to remit to Ryder the net amount of
such collections after deducting AT&T's rates for 900 transport
service, any charges disputed by callers, federal, state, and
local taxes, and AT&T's billing service fee.19 The parties did
not file this Billing Agreement with the Commission as a contract
tariff, because the Commission had mandatorily detariffed billing
and collection services.20
7. The Billing Agreement stated explicitly that ``charges
for tariffed services will not be abated or refunded in the event
of delay or failure of performance of this Agreement.''21 In
addition, regarding any harm to Ryder that might result from
AT&T's inadequate performance of billing and collection services,
the Billing Agreement expressly limited AT&T's potential
liability to Ryder to ``direct damages,'' excluding, inter alia,
``incidental, indirect, special, or consequential damages....''22
Lastly, the Billing Agreement provided that it was governed by
the laws of the State of New Jersey.23
8. Although the record in this proceeding does not
indicate that Ryder experienced any problems with the 900
transport service it received from AT&T pursuant to CT 6831,24
Ryder did experience some problems (of disputed nature and
magnitude) with the billing and collection services AT&T
provided.25 After experiencing these billing and collection
problems, Ryder terminated all of its employees and closed its
900 pay-per-call business on June 25, 1997.26 On July 24, 1997,
approximately three months after CT 6831 became effective, Ryder
formally notified AT&T that it was canceling all
telecommunications services under CT 6831 and directed AT&T to
disconnect all 900 telephone numbers assigned to it.27
9. As a result of Ryder's decision to cease purchasing
telecommunications services from AT&T and close its business,
Ryder failed to meet its MARC under CT 6831.28 Consequently,
pursuant to the terms of the early service termination provision
in CT 6831, AT&T notified Ryder, by letter dated November 3,
1997, of Ryder's liability to AT&T in the amount of approximately
$1.6 million in early service termination charges.29
II.C. The Federal District Court Proceeding
10. On May 12, 1999, Ryder filed a complaint against AT&T
in state court in Florida alleging that AT&T had breached its
obligations under the Billing Agreement.30 Ryder alleged that
AT&T had failed to timely and accurately account for and remit to
Ryder proceeds that AT&T had collected from Ryder's customers on
Ryder's behalf under the Billing Agreement.31 Claiming that
AT&T's breach of the Billing Agreement had depleted Ryder's
revenue stream to the point that it was forced out of business,
Ryder sought damages for its lost revenues, its company's value
as a going concern, and other costs.32 Ryder's Court Complaint
did not allege that AT&T had violated CT 6831 or that any
provision of CT 6831, including the early service termination
provision, violated the Communications Act.33
11. After removing Ryder's complaint to the United States
District Court for the Southern District of Florida (``District
Court'' or ``Court''), AT&T filed an answer and counterclaims
against Ryder.34 AT&T's counterclaims alleged, inter alia, that
Ryder breached CT 6831 by terminating service before the end of
the three-year term, failing to meet its MARC, and then refusing
to pay early service termination charges; thus, AT&T further
alleged that, pursuant to the early service termination provision
in CT 6831, Ryder owed AT&T approximately $1.6 million for unpaid
tariff charges.35 In response, Ryder asserted that its
obligations under CT 6831's early service termination provision
should be excused, because it was AT&T's ``negligence, gross
negligence, and willful breach'' of the Billing Agreement that
caused Ryder to incur those obligations, and AT&T should not be
permitted to benefit from its own wrongful action.36 Again,
Ryder did not allege, either by way of counterclaim or
affirmative defense, that AT&T had violated CT 6831 or that any
provision of CT 6831, including the early service termination
provision, violated the Communications Act.37
12. From the early stages of the District Court
proceeding, Ryder took the position that it could recover
consequential damages, including recoupment/cancellation of the
early service termination charges due under CT 6831, as part of
its damages for AT&T's alleged breach of the Billing Agreement.38
Ryder took this position despite the Billing Agreement's express
exclusion of liability for consequential damages, and despite the
Billing Agreement's clear statement that charges for tariffed
services would not be abated or refunded in the event of a
billing ``delay or failure of performance.''39
13. In at least two separate rulings, the District Court
squarely rejected Ryder's position, holding that Ryder could not
include as consequential damages arising from any breach by AT&T
of the Billing Agreement the early service termination charges
owed by Ryder under CT 6831.40 The District Court held, in other
words, that AT&T could collect and retain early service
termination charges from Ryder, notwithstanding a breach by AT&T
of the Billing Agreement. In so ruling, the Court upheld the
validity of the Billing Agreement's liability limitation
provision under New Jersey law, because Ryder had failed to show
that AT&T's breach of the Billing Agreement was willful and
wanton. 41 As a result, the District Court limited Ryder's
potential recovery to ``direct damages,'' meaning any funds that
AT&T might have wrongfully withheld from Ryder.42
14. After a week long trial, the jury returned a verdict in
favor of Ryder on its claim against AT&T alleging a breach of the
Billing Agreement, and awarded Ryder $984,795.38 in ``direct
damages,'' the amount that AT&T had wrongfully withheld.43 The
jury also returned a verdict against AT&T on its counterclaim
against Ryder for early service termination charges, finding that
Ryder's failure to meet its MARC under CT 6831 should be excused
because of AT&T's grossly negligent provision of 900 transport
services under CT 6831.44
15. In a Post-Trial Order issued on January 31, 2001, the
District Court upheld the jury's verdict in favor of Ryder on its
claim against AT&T for breach of the Billing Agreement.45 The
District Court overruled the jury's verdict denying AT&T's
counterclaim, however, because ``there was simply no evidence
that there were any irregularities or problems with the 900
transport services provided by AT&T to Ryder'' under CT 6831.46
The Court therefore granted as a matter of law AT&T's
counterclaim for early service termination charges, finding that
``it is uncontested that Ryder breached the Contract Tariff
Agreement'' by failing to meet its MARC.47
II.D. The Federal District Court's Referral
16. In its January 31, 2001 Post-Trial Order, upon finding
in favor of AT&T on its counterclaim for early service
termination charges, the Court did not simply award those charges
to AT&T. Instead, the Court observed a significant difference
between the charges that Ryder owed under CT 6831's early
service termination provision and the charges that Ryder would
have owed under Tariff No. 1's early service termination
provision.48 This led the Court to ask ``whether it is
permissible to abrogate the Tariff No. 1's discontinuance clause
in such a manner.''49 The Court then stated that, ``in the
present case, it is conceivable that a nearly $1,600,000.00
termination penalty, which is what application of the Tariff
Agreement's [CT 6831's] discontinuance provision amounts to, may
be considered an unreasonable and unenforceable tariff
practice.''50 Without further explanation, the Court concluded
that, pursuant to the primary jurisdiction doctrine, it should
refer to the Commission ``the issue of the appropriate measure of
damages for Ryder Communications, Inc.'s breach'' of CT 6831.51
II.E. Ryder's Commission Complaint
17. On December 13, 2002, almost two years after the
District Court's referral order, Ryder filed the instant
Complaint against AT&T.52 The Complaint claims that AT&T's
enforcement of CT 6831's early service termination provision
violates the reasonableness standard of section 201(b) of the
Act, because it was AT&T's own breaches of the Billing Agreement
that caused Ryder to go out of business, which, in turn, caused
Ryder to miss its MARC and incur early service termination
charges under CT 6831.53 The Complaint also claims that, on its
face, CT 6831's early service termination provision violates the
reasonableness standard of section 201(b) of the Act, because the
provision applies even when AT&T's own misconduct causes a
customer to terminate service early and incur charges
thereunder.54 For the reasons described below, we deny both
claims.55
III. DISCUSSION
III.A. CT 6831 Lawfully Superceded Tariff No. 1.
18. The District Court clearly directed the parties to
present to the Commission the following issue: whether the
parties lawfully could, by agreement, agree to be bound by the
early service termination provision in CT 6831 rather than the
early service termination provision in Tariff No. 1, given that
the former triggers a significantly higher charge than the
latter.56 The resolution of that issue is equally clear. As the
parties correctly stipulate, it is a settled point of law that a
contract tariff may lawfully take precedence over the provisions
of a generally filed tariff.57 It is well established that,
under the Communications Act, carriers are not limited to
offering service subject to generic tariffs, but may also operate
pursuant to individually negotiated contract tariffs that
supercede the generic tariff on file for the same service.58
Since 1991, the Commission has specifically allowed AT&T to offer
service pursuant to contract tariffs, like CT 6831, that contain
minimum volume commitments by the customer for each service.59
Consequently, we conclude that the early service termination
provision in CT 6831 lawfully superceded the early service
termination provision of Tariff No. 1, even though the former
triggers a higher charge than the latter. We note that the
higher charge triggered by CT 6831's early service termination
provision should not be viewed in isolation, but rather as a quid
pro quo for CT 6831's lower usage charges (as compared to Tariff
No. 1). 60
III.B. CT 6831's Early Service Termination Provision
Complies with the Reasonableness Standard of Section
201(b), Both As Applied and On Its Face.
19. The District Court did not state clearly what
additional issues, if any, it expected the parties to present to
the Commission, other than the issue addressed in Part III(A)
above. As a result, Commission staff spent considerable time
with the parties, both before and after the instant Complaint was
filed, discussing how properly to frame the issues presented,
with all sides expressing varying viewpoints.61 We are not
completely confident (nor is AT&T) that Ryder's Complaint
comports with the intent of the District Court's referral
order.62 Nevertheless, because the ultimate responsibility for
presenting referred issues to the Commission lies with the
parties (as the District Court recognized),63 and because we want
to assist the District Court as much and as quickly as possible,
we proceed below to consider the issues as framed by Ryder's
Complaint.64
III.B.1. Enforcement of the Early Service Termination
Provision in CT 6831 Is Not Unjust and
Unreasonable in the Present Case.
20. Ryder argues that AT&T's breach of the Billing
Agreement caused Ryder to go out of business, which, in turn,
caused Ryder to miss its MARC and incur early service termination
charges under CT 6831.65 Ryder contends, therefore, that
permitting AT&T to enforce CT 6831's early service termination
provision would unreasonably allow AT&T to profit from its own
misconduct.66 Ryder maintains, in other words, that we should
preclude AT&T from collecting any damages (in the form of early
service termination charges) for Ryder's admitted breach of CT
6831.67 For the following reasons, we disagree.68
21. As Ryder itself repeatedly observes, the parties
deliberately designed CT 6831 and the Billing Agreement to
operate symbiotically and to define the parameters of the
parties' business relationship.69 As part of that conscious
design, the parties expressly allocated the risk that AT&T might
breach the Billing Agreement and thereby harm Ryder: AT&T would
have to pay Ryder ``direct damages'' arising from the breach, but
Ryder would still have to pay AT&T any charges incurred under CT
6831, subject to Ryder's recoupment of those charges as
consequential damages if AT&T's breach of the Billing Agreement
constituted willful and wanton misconduct. Put differently, AT&T
assumed the risk of paying direct damages, whereas Ryder assumed
the risk of incurring consequential damages, unless AT&T's breach
was willful and wanton.70
22. In particular, the Billing Agreement plainly states
that ``charges for tariffed services will not be abated or
refunded in the event of delay or failure of performance of this
Agreement.''71 Thus, according to the Billing Agreement, charges
incurred by Ryder under CT 6831 remain due, even if AT&T breaches
the Billing Agreement. The Billing Agreement also provides that,
if AT&T breaches the Billing Agreement, AT&T will be liable to
Ryder only for ``direct damages,'' and not ``consequential
damages,'' arising from the breach; however, the Billing
Agreement specifies New Jersey law as governing, and New Jersey
law (according to the District Court in this matter) precludes
limitations on liability for willful and wanton misconduct.72
Consequently, in sum, the deal that the parties reached under the
Billing Agreement is as follows: if AT&T breaches the Billing
Agreement, Ryder still has to pay AT&T all charges incurred under
CT 6831, but AT&T has to pay Ryder direct damages arising from
the breach, and also has to pay any consequential damages arising
from the breach, potentially including return of early service
termination charges, if AT&T's breach was willful and wanton.
23. Ryder tried and failed to show in the court proceeding
that AT&T's breach of the Billing Agreement constituted willful
and wanton misconduct.73 Moreover, Ryder does not dispute here
the interpretation of the Billing Agreement described above.74
In addition, the District Court found, and Ryder does not contest
here, that Ryder breached CT 6831 by terminating service before
the end of the three-year term, failing to meet its MARC, and
then refusing to pay early service termination charges.
Furthermore, a filed federal tariff is presumed lawful, and the
filing carrier must enforce the tariff's terms.75 Given all of
these circumstances, it is perfectly reasonable under section
201(b) for AT&T to seek the benefit of its bargain -- payment by
Ryder of the early service termination charges incurred under CT
6831.
24. Indeed, Ryder essentially concedes that CT 6831 and the
Billing Agreement, as written, preclude its claims. Ryder
argues, therefore, that we should effectively rewrite CT 6831 so
Ryder can avoid the allegedly harsh results of the parties'
deal.76 In making that argument, Ryder relies, in part, on the
``Sierra-Mobile doctrine.''77 Ryder's reliance is misplaced.
Under the principles of the Sierra-Mobile doctrine, the
Commission may effectively alter the terms of a contract tariff
at the behest of one of the original negotiating parties, but
only if there exists a compelling public interest in doing so, or
convincing evidence of unfairness in the contract formation
process.78 Moreover, ``[t]he threshold for demonstrating
sufficient harm to the public interest to warrant contract
reformation under the Sierra-Mobile doctrine is much higher than
the threshold for demonstrating unreasonable conduct under
Sections 201(b) and 202(a) of the Act.''79 This preserves the
integrity of contracts, which is vital to the proper functioning
of any commercial enterprise, including the communications
market. In fact, the long-term health of the communications
market depends on the certainty and stability that stems from the
predictable performance and enforcement of contracts.80 Here, as
explained below, Ryder shows neither a compelling public interest
nor unfairness in the formation of CT 6831.
25. Ryder makes some general assertions that it lacked
bargaining power in its negotiations with AT&T and thus had no
choice but to accept the ``boilerplate'' aspects of CT 6831,
including the early service termination provision.81 AT&T
effectively rebuts these assertions with evidence that its
negotiations with Ryder were ``extensive, and included a healthy
`give and take' with respect to the terms and conditions of the
agreements.''82 AT&T also states convincingly that the early
service termination provision was a quid pro quo for the reduced
rates that Ryder had achieved through hard bargaining.83
Therefore, Ryder falls far short of demonstrating the kind of
unfairness that might warrant reformation of CT 6831.84
26. Ryder maintains that reforming CT 6831's early service
termination provision so as to vitiate Ryder's liability
thereunder would serve a compelling public interest by preventing
carriers from using boilerplate contract provisions to insulate
themselves from the consequences of their own misconduct.85
Ryder overlooks several key facts: the Commission detariffed the
services at issue here, and as far as the record shows, no other
party opted into CT 6831 or has agreed in negotiations to a
contract provision that would harm them in the manner claimed by
Ryder here.86 Thus, Ryder's assertion that we need to protect
others from suffering the same fate as Ryder rests on sheer
speculation.
27. Moreover, and perhaps most importantly, Ryder's own
description of the parties' business relationship reveals that
Ryder could have foreseen, and thus sought to address differently
in the agreements, the very circumstances that allegedly occurred
here. In particular, Ryder emphasizes repeatedly the
interrelationship between the parties' two agreements, and
highlights the fact that its ability to meet its MARC under CT
6831 depended on the cash flow that it received from AT&T under
the Billing Agreement.87 Thus, Ryder knew or should have known
that a breach by AT&T of the Billing Agreement might cause a
breach by Ryder of CT 6831. Yet the record contains no evidence
that Ryder sought to allocate the risk of that occurrence in any
manner other than what presently appears in the agreements:
Ryder would remain liable for early service termination charges,
while AT&T would be liable for direct damages if its breach was
not willful and wanton, or direct and consequential damages
(including return/cancellation of any early service termination
charges) if its breach was willful and wanton (and the Court has
ruled that AT&T's breach was not willful and wanton).88
28. Given these circumstances, revising CT 6831 so as to
eliminate Ryder's responsibility to pay early service termination
charges would serve only Ryder's private economic interest, not a
public interest. In fact, revising CT 6831 in that manner would
contravene the strong public interest in preserving the sanctity
of contracts, especially because the MARC and its attendant
termination charges were principal components of the exchange for
reduced rates. As AT&T states aptly: ``There is simply no
justification for allowing a customer to negotiate for
concessions on price, to sign a contract containing customized
provisions that are the product of voluntary agreement, and then
to run to the Commission to have the Commission reform a
provision of the contract that was an integral part of the quid
pro quo bargain but which subsequently produces hardship to the
customer.''89
29. Buttressing our conclusion is Ryder's insistence that
we need not, and probably should not, disturb any of the District
Court's rulings.90 We agree with Ryder, but accepting the
District Court's rulings as given almost compels denial of
Ryder's claim, as Ryder has chosen to present it. Here again are
the relevant Court rulings: (1) Ryder breached CT 6831 by
terminating service before the three-year term had ended, missing
its revenue commitments, and then refusing to pay early service
termination charges; (2) AT&T provided transport service to Ryder
in accordance with the requirements of CT 6831; and (3) although
AT&T breached the Billing Agreement by wrongfully withholding
certain funds, Ryder's damages are limited by the Agreement and
New Jersey law to receipt of those funds, because AT&T's breach
of the Agreement was not willful and wanton. Taken together,
these rulings leave little room for Ryder to escape liability for
the early service termination charges.
30. At bottom, all that Ryder actually proffers to support
its claim is a simplistic notion of fairness: AT&T harmed Ryder
first, so AT&T should not be allowed to recover anything from
Ryder. What Ryder ignores is that Ryder expressly agreed, in
exchange for reduced per-minute rates, to allow AT&T to recover
early service termination charges in the very circumstances that
allegedly occurred here. Thus, what would really be unfair would
be to permit Ryder to shirk its contractual commitments and to
deprive AT&T of the benefit of its bargain.
31. In sum, for the reasons stated above, AT&T's
enforcement of CT 6831's early service termination provision
comports with the reasonableness requirement of section 201(b) of
the Act. Consequently, we deny Count Two of Ryder's Complaint.
III.B.2. The Early Service Termination Provision in CT
6831 Is Not Unjust and Unreasonable On Its Face.
32. Ryder asserts that the early service termination
provision in CT 6831, on its face, violates the reasonableness
requirement of section 201(b) of the Act, because the provision
contains no express abrogation of its effect in the event that
AT&T's misconduct causes the customer to terminate service
early.91 For the following reasons, we disagree.
33. The Commission has consistently allowed carriers to
include provisions in their tariffs that impose early termination
charges on customers who discontinue service before the
expiration of a long-term discount rate plan containing minimum
volume commitments.92 Many of these provisions required
individual customers, like Ryder, to pay charges similar, if not
equivalent to, the charges that the customers would have paid had
they continued service and fulfilled their minimum volume
commitments.93 In approving these provisions, the Commission
recognized implicitly that they were a valid quid pro quo for the
rate reductions included in long-term plans.94 The Commission
has acknowledged that, because carriers must make investments and
other commitments associated with a particular customer's
expected level of service for an expected period of time,
carriers will incur costs if those expectations are not met, and
carriers must be allowed a reasonable means to recover such
costs. 95 In other words, the Commission has allowed carriers to
use early service termination provisions to allocate the risk of
investments associated with long term service arrangements with
their customers. Given this history of Commission approval of
early service termination provisions similar to the one at issue
here, and the reasonable goals that they generally serve, Ryder
must provide convincing reasons why we should hold that CT 6831
is unlawful on its face.
34. As stated above, Ryder claims that CT 6831's early
service termination provision is facially unlawful because it
does not include a way for a customer to avoid the payment of
termination charges if AT&T somehow causes the customer to
terminate service before the expiration of the contract period.
Although Ryder accurately describes the provision, Ryder
overlooks another part of CT 6831 that ameliorates Ryder's
concern. In particular, CT 6831 incorporates by reference
certain aspects of Tariff No. 1, including a section stating that
AT&T's ``liability, if any, for its willful misconduct is not
limited by this tariff.''96 Consequently, under CT 6831, if AT&T
were to engage in willful misconduct in its provision of
transport service and thereby cause a customer to terminate
service early and incur termination charges, the customer could
seek to recover those charges as damages for AT&T's misconduct.
Indeed, that is precisely what Ryder tried and failed to do in
the court proceeding, and Ryder failed only because it provided
no evidence of any misconduct by AT&T in the provision of
transport service. Thus, contrary to Ryder's assertion, CT 6831
does, in fact, provide a means for a customer ultimately to avoid
paying early service termination charges if AT&T's misconduct
causes the early termination.
35. Ryder complains that Tariff No. 1's liability
limitation provision does not save CT 6831's early service
termination provision, because it only gives a customer a
potential cause of action for recovery of charges rather than an
immediate immunity from paying the charges in the first place.
What Ryder seems to be saying is that, in order to pass muster,
CT 6831 must excuse payment of early service termination charges
immediately upon a customer's mere assertions that AT&T has
engaged in willful misconduct and that the misconduct has caused
the customer to terminate service, before AT&T has the
opportunity to dispute either assertion.97 We disagree. Given
the investments that AT&T must make to accommodate a substantial
long-term contract, we do not believe that the Act's
reasonableness standard requires AT&T to allow the customer to
make those unilateral determinations in the first instance. The
reality is that, if the parties intractably disagree about
whether AT&T engaged in willful misconduct and/or whether such
misconduct caused the customer to terminate service early,
litigation will ensue. Whether CT 6831 requires the customer to
pay termination charges pending the outcome of such litigation is
not a matter on which section 201(b) dictates an outcome either
way.
36. Ryder further complains that Tariff No. 1's liability
limitation provision does not save CT 6831's early service
termination provision, because it fails to address a situation
where AT&T's misconduct concerns something other than AT&T's
provision of transport service, but still causes the customer to
terminate service early.98 Tariffs filed with the Commission
ordinarily do not address matters other than the provision of
communications services offered therein.99 Consequently, CT
6831's failure to do so is certainly not facially unreasonable.
In particular, CT 6831's failure to anticipate every conceivable
situation where AT&T's conduct might cause Ryder harm is not
unreasonable. This is especially true because, as described
above, Ryder knew of the foreseeable risks and voluntarily agreed
to allocate them as set forth in the parties' contracts.
Moreover, we cannot prejudge that Ryder's remedies outside CT
6831 would be inadequate.
37. Ryder also contends that, for the same reason that the
Commission prohibits carriers from using tariff provisions to
insulate themselves from liability for willful misconduct,100 the
Commission here should prohibit AT&T from using CT 6831 to profit
from its willful misconduct.101 Ryder's analogy is flawed. As
explained above, CT 6831 does, in fact, preclude AT&T from
profiting from its willful misconduct with respect to the
relevant service. If AT&T harms a customer via willful
misconduct in the provision of transport services, CT 6831 allows
the customer to seek the recovery of damages, including
recoupment/cancellation of early service termination charges.
38. In sum, CT 6831's early service termination provision,
read in context, comports with the reasonableness requirement of
section 201(b). Consequently, we deny Count One of Ryder's
Complaint.
IV. ORDERING CLAUSES
39. ACCORDINGLY, IT IS ORDERED, pursuant to sections 4(i),
4(j), 201(b), and 208 of the Communications Act of 1934, as
amended, 47 U.S.C. §§ 154(i), 154(j), 201(b), 208, that the
Complaint of Ryder Communications, Inc. IS DENIED.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
_________________________
1 Formal Complaint of Ryder Communications, Inc., File No. EB-
02-MD-038 (filed Dec. 13, 2002) (``Complaint'').
2 47 U.S.C. § 208.
3 47 U.S.C. § 201(b).
4 Second Revised Joint Statement, File No. EB-02-MD-038 (filed
Mar. 14, 2003) (``Joint Statement'') at 2, ¶ 3; Complaint at 2, ¶
2. According to AT&T, a service bureau acts as an intermediary
between 900 pay-per-call information providers and long distance
telephone companies, such as AT&T, and provides the physical
facilities through which an information provider operates its
programs and connects to a long distance carrier. See Answer of
AT&T Corp., File No. EB-02-MD-038 (filed Feb. 3, 2003)
(``Answer'') at 29, n.5.
5 Joint Statement at 2, ¶ 6.
6 Joint Statement at 2-3, ¶ 8; Complaint at 5-6, ¶ 11; Answer
at 28-29, ¶¶ 52-53; Reply of Ryder Communications, Inc., File No.
EB-02-MD-038 (filed Feb. 10, 2003) (``Reply'') at 10-11, ¶ 14.
7 Joint Statement at 3, ¶ 12. AT&T marketed the 900 transport
service under the name ``AT&T MultiQuest'' service. Id. at 3, ¶
13.
8 Joint Statement at 3, ¶ 13; Answer, Ex. 28 (AT&T Tariff
F.C.C. No. 1).
9 Joint Statement at 4, ¶¶ 15-16, 20; Answer at 31, ¶ 59, and
at Ex. 30 (Custom Offer Agreement (COA) No. CX003), Section 2,
``COA Term; Renewal Options'', Section 5, ``Discounts''
(indicating that specified monthly discounts ranged from at least
12.50% to 18.25% based on usage, and that additional discounts
also applied)).
10 Joint Statement at 4, ¶ 16, 20; Complaint at 5, ¶ 10; Answer
at 31, ¶¶ 59-60, and at Ex. 30 (COA No. CX003), Section 3,
``Minimum Commitments/Charges;'' Complaint, Ex. E-6 (CT 6831) at
Section 3, ``Minimum Commitments/Charges.''
11 Complaint, Ex. E-6 (CT 6831) at Section 3, ``Minimum
Commitments/Charges;'' Answer at Ex. 30 (COA No. CX003) at
Section 3, ``Minimum Commitments/Charges.''
12 Answer at Ex. 30 (COA No. CX003) at 6(D),
``Discontinuance''; Complaint, Ex. E-6 (CT 6831) at Section 6(D),
``Discontinuance'' (``early service termination provision'');
Joint Statement at 4-5, ¶ 21.
13 Answer at Ex. 30 (COA No. CX003) at 6(D), ``Discontinuance'';
Complaint, Ex. E-6 (CT 6831) at Section 6(D), ``Discontinuance;''
Joint Statement at 5, ¶ 22.
14 Answer, Ex. 30 (COA No. CX003), Section 1, ``Services
Provided;'' Complaint, Ex. E-6 (CT 6831), Section 1, ``Services
Provided.'' Section 1 of CT 6831 and COA No. CX003 state that
Tariff No. 1 is ``incorporated herein by reference.'' Id.
15 Section 2.3.1.A of Tariff No. 1 states: ``The Company's
liability, if any, for its willful misconduct is not limited by
this tariff.'' Answer, Ex. 28 (Tariff No. 1), Section 2.3.1.A.
16 Pursuant to Commission rules in effect during the relevant
period, AT&T was required to file a tariff summarizing the terms
of the parties' contract. Competition in the Interstate
Interexchange Marketplace, Report and Order, 6 FCC Rcd 5880,
5902-03, ¶ 121 (1991) (subsequent history omitted)
(``Interexchange Competition Order''); 47 C.F.R. § 61.55 (1991).
The Commission later mandatorily detariffed interstate, domestic,
interexchange services, including 900 transport service, provided
by AT&T and other nondominant interexchange carriers. Policy and
Rules Concerning the Interstate, Interexchange Marketplace,
Implementation of Section 254(g) of the Communications Act of
1934, Second Report and Order, 11 FCC Rcd 20730 (1996), recon.,
12 FCC Rcd 15014 (1997), stay granted, MCI Telecommunications
Corp. v. FCC, No. 96-1459 (D.C. Cir. Feb. 13, 1997); Order on
Reconsideration, 12 FCC Rcd 15,014 (1997) (``Domestic Detariffing
Order on Reconsideration''); Second Order on Reconsideration and
Erratum, 14 FCC Rcd 6004 (1999) (``Domestic Detariffing Second
Order on Reconsideration''); stay lifted and aff'd, MCI WorldCom
v. FCC, 209 F.3d 760 (D.C. Cir. April 28, 2000), Memorandum
Report and Order, 15 FCC Rcd 22321 (Com. Car. Bur. 2000)
(``Domestic Transition Order''); Common Carrier Bureau Extends
Transition Period for Detariffing Consumer Domestic Long Distance
Services, Public Notice, 16 FCC Rcd 2906 (Com. Car. Bur. 2001);
Joint Statement at 4, ¶ 18; Complaint, Ex. E-6 (CT 6831).
17 Joint Statement at 4, ¶ 18; Complaint, Ex. E-6 (CT 6831).
CT 6831 and COA No. CX003 contain identical terms, with the only
difference being that AT&T filed CT 6831 in standard tariff
format in accordance with the Commission's requirements. See 47
C.F.R. §§ 61.54, 61.55 (1991). Although CT 6831 was available to
any other customer ``similarly situated'' to Ryder (Complaint, Ex
E-6 (CT 6831) at original page 4, ``Availability''), no other
party ordered service from AT&T under CT 6831. Supplement to
Answer of AT&T Corp, File No. EB-02-MD-038 (filed Feb. 6, 2003)
(``Supplemental Answer'') at 24, ¶ 58.
18 Joint Statement at 5, ¶ 24; Answer, Ex. 32 (Billing Services
Agreement). AT&T refers to these billing services as
``MultiQuest'' premium billing services. See Answer at 11-12, ¶
7.
19 Joint Statement at 5, ¶ 27; Complaint at 5-6, ¶ 11; Answer at
31-32, ¶ 61, and at Ex. 32 (Billing Services Agreement) at ¶¶ 1-
3, ``Billing Services,'' ``Caller Inquiry and Adjustments,''
``Charges/Remittance.''
20 See Detariffing of Billing and Collection Services, Report and
Order, 102 F.C.C.2d 1150 (1986) (``Billing Detariffing Order'');
AT&T 900 Dial-It Services and Third Party Billing and Collection
Services, Memorandum Opinion and Order, 4 FCC Rcd 3429 (1989)
(``900 Dial-It Order'').
21 Answer, Ex. 32 (Billing Services Agreement) at ¶ 12,
``Tariffed Services.''
22 Answer, Ex. 32 (Billing Services Agreement) at ¶ 14,
``Limitations of Liability.'' The Billing Agreement states, in
pertinent part, that ``AT&T's entire liability [to Ryder] for any
damages caused by AT&T's performance of billing services under
this agreement regardless of the form of action, whether in
contract, tort including negligence, or otherwise. . . shall be
limited to direct damages which are proven in an amount not to
exceed $100,000. . . . AT&T shall not be liable for incidental,
indirect, special, or consequential damages or for lost profits,
savings or revenues of any kind, whether or not AT&T has been
advised of the possibility of such damages.'' Id. Consequential
damages are damages, loss, or injury that do not flow directly
and immediately from the act of the party, but only from some of
the consequences or results of such act. See, e.g., Black's Law
Dictionary (Pocket ed. 1996).
23 Joint Statement at 5, ¶ 29; Answer Ex. 32 (Billing Services
Agreement) at ¶ 18G, ``General.''
24 See, e.g., Complaint, Exhibit E-2 (Post-Trial Order, Case No.
99-6688-CIV-HIGHSMITH, Jan. 31, 2001, U.S.D.C., Southern District
of Florida) (``Post-Trial Order'') at 8 (stating that ``there was
simply no evidence that there were any irregularities or problems
with the phone services provided by AT&T to Ryder Communications,
Inc.'').
25 See, e.g., Complaint at 4, 6-7, 13, ¶¶ 8, 12, 24; Answer at
12-13, 16, 23-24, ¶¶ 8, 12, 24; Complaint, Ex. E-2 (Post-Trial
Order) at 4-5 (finding that AT&T breached the Billing Agreement).
26 Joint Statement at 6, ¶ 35.
27 Joint Statement at 7, ¶ 37.
28 Joint Statement at 7, ¶ 38.
29 Joint Statement at 7, ¶ 40; Answer, Ex. 36 (Letter from
Robert S. Iacuone, AT&T, to David Ryder, Nov. 3, 1997).
According to AT&T, AT&T also sent a final bill to Ryder in June
1998 showing that, after netting the termination charges against
the amounts due Ryder from AT&T under the Billing Agreement,
Ryder owed AT&T over $1.4 million. Answer at 35, ¶ 72.
30 Joint Statement at 7, ¶ 41; Answer, Ex. 1 (Complaint, Ryder
Communications, Inc. v. AT&T Corp., filed May 17, 1999, Broward
County, Florida) (``Court Complaint'') at 2-3, ¶¶ 11-16.
31 Answer, Ex. 1 (Court Complaint) at 3, ¶¶ 12-16.
32 Answer, Ex. 1 (Court Complaint) at 3, ¶¶ 12-16.
33 Joint Statement at 8, ¶ 46.
34 Joint Statement at 7, ¶ 43; Answer, Ex. 2 (Answer and
Counterclaims of AT&T Corp., Ryder Communications, Inc. v. AT&T
Corp., Case No. 99-6688-CIV-HIGHSMITH, filed June 14, 1999,
U.S.D.C., Southern District of Florida) (``AT&T Court Answer and
Counterclaims'').
35 Joint Statement at 8, ¶ 44; Answer, Ex. 2 (AT&T Court Answer
and Counterclaims), at 9-10, ¶¶ 49-54.
36 Joint Statement at 8, ¶ 46; Answer, Ex. 3 (Ryder
Communications, Inc.'s Answer and Affirmative Defenses to AT&T's
Counterclaim, Case No. 99-6688-CIV-HIGHSMITH, filed June 14,
1999, U.S.D.C., Southern District of Florida) (``Ryder Court
Answer'') at 2, ¶ 7.
37 Joint Statement at 8, ¶ 46.
38 See, e.g., Answer, Ex. 4 (Memorandum In Response to AT&T
Memorandum Concerning Filed Tariff Doctrine, Case No. 99-6688-
CIV-HIGHSMITH, filed Sept. 3, 1999, U.S.D.C., Southern District
of Florida) at 7 (stating that any termination charge owed by
Ryder ``would simply be further damage suffered by [Ryder].
[Ryder] was prevented from using the minimum service by AT&T's
breach of its billing contract with [Ryder]. Thus, whatever
amount [Ryder] is deemed to owe AT&T for minimum services under
the tariff, that amount is another element of the damages
suffered by [Ryder] as a result of AT&T's breach of the billing
and collection contract.''); Answer, Ex. 7 (Plaintiffs'
Memorandum In Response to AT&T's Motion For Partial Summary
Judgment, Case No. 99-6688-CIV-HIGHSMITH, filed Oct. 10, 2000,
U.S.D.C., Southern District of Florida) (``Ryder Opposition to
AT&T Partial Summary Judgment Motion'') at 16 (``AT&T should . .
. indemnify [Ryder] for all contract tariff penalties caused by
[Ryder's] inability to continue as a business ($1,800,000.00)'');
Answer, Ex. 19 (Plaintiffs' Notice of Filing of Proposed Jury
Instructions, Case No. 99-6688-CIV-HIGHSMITH, filed Nov. 14,
2000, U.S.D.C., Southern District of Florida), Plaintiffs'
Proposed Jury Instruction No. 2 (stating that ``direct special
damages'' to Ryder should include any contract penalties
incurred by Ryder); Id., Ex. 17 (Trial Transcript, Case No. 99-
6688-CIV-HIGHSMITH, Dec. 21, 2000, U.S.D.C., Southern District of
Florida) (``Trial Transcript'') at 178-180 (Court denying Ryder's
request to instruct the jury that Ryder was entitled to recover
early service termination charges as part of its damages).
39 Answer, Ex. 32 (Billing Services Agreement) at ¶¶ 12, 14.
40 In so ruling, the Court also held that, had Ryder shown that
AT&T's breach of the Billing Agreement did, in fact, constitute
willful and wanton misconduct, Ryder could have recouped or
cancelled its early service termination charges as consequential
damages arising from AT&T's breach. Answer, Ex. 5 (Order
Determining Applicability of Filed Tariff Doctrine, Case No. 99-
6688-CIV-HIGHSMITH, Sept. 27, 1999, U.S.D.C., Southern District
of Florida) at 5; Ex. 8 (Order Granting Defendant's Motion for
Partial Summary Judgment, Case No. 99-6688-CIV-HIGHSMITH, Dec. 8,
2000, U.S.D.C., Southern District of Florida) (``Partial Summary
Judgment Order'') at 4-5; Ex. 17 (Trial Transcript) at 178-180.
41 Joint Statement at 9, ¶¶ 51-53; Answer at 37-40, 92-95, ¶¶ 76-
81, 181-87, and at Ex. 8 (Partial Summary Judgment Order)
(``Partial Summary Judgment Order'') at 4-5. The Court found
that, although AT&T's billing errors may have amounted to
negligent or grossly negligent performance of its duties under
the Billing Agreement, they did not rise to the level of specific
intent required by the ``willful and wanton'' standard to set
aside the limitation of liability provision under New Jersey law.
The Court stated that ``it is uncontested that Defendant took
prompt remedial action when Ryder brought the accounting errors
to the attention [of AT&T].'' Answer, Ex. 8 (Partial Summary
Judgment Order) at 4. See Answer at 46-47, 96-97, ¶¶ 95-97,
190-91 (citing Answer, Ex. 17 (Trial Transcript) at 180. See
also Answer at 53-54, 111, ¶¶ 110, 218, and at corrected Ex. 27
(Order, Case No. 99-6688-CIV-HIGHSMITH, Mar. 27, 2001, U.S.D.C.,
Southern District of Florida) (denying Ryder's request for
prejudgment interest on its damage award, because AT&T, ``in good
faith, continued to withhold the monies owed to Plaintiff Ryder
Communications, Inc. once it became evident that they were owed
due to (a) Plaintiff Ryder's breach of the parties' tariff
agreement and (b) the tariff agreement's liquidated damages
provision.'').
42 Answer, Ex. 8 (Partial Summary Judgment Order) at 5 (stating
that ``the limitation of liability provision contained in the
Billing Agreement] must be given effect.''); Id., Ex. 20 (Court's
Instructions to the Jury, Case No. 99-6688-CIV-HIGHSMITH, Jan.
31, 2001, U.S.D.C., Southern District of Florida) at 12; Joint
Statement at 10, ¶ 60.
43 Answer, Ex. 23 (Final Judgment, Case No. 99-6688-CIV-
HIGHSMITH, Jan. 31, 2001, U.S.D.C., Southern District of Florida)
at 1; Complaint, Ex. E-2 (Post-Trial Order) at 5; Answer at 45,
48, ¶¶ 93, 99. The jury was not asked to make any finding, and
did not make any finding, as to whether any breach of the Billing
Agreement by AT&T was the proximate cause of Ryder's decision to
close its business. See Joint Statement at 11, ¶ 63; Answer at
18, 48-49, ¶¶ 14, 99.
44 Complaint, Ex. E-2 (Post-Trial Order) at 7-8. As far as we
can tell from the record, Ryder did not assert this alleged
excuse until shortly before trial. See Answer, Ex. 9 (Order,
Case No. 99-6688-CIV-HIGHSMITH, Dec. 18, 2000, U.S.D.C., Southern
District of Florida) at 2 (stating that gross negligence in the
provision of transport service could be an affirmative defense to
AT&T's counterclaim); Joint Statement at 9, ¶ 54.
45 Complaint, Ex. E-2 (Post-Trial Order) at 4-5.
46 Complaint, Ex. E-2 (Post-Trial Order) at 8. See Joint
Statement at 11, ¶ 68; Complaint, Ex. E-2 (Post-Trial Order) at
7-8.
47 Complaint, Ex. E-2 (Post-Trial Order) at 8.
48 Complaint, Ex. E-2 (Post-Trial Order) at 8-10. According to
the Court, under CT 6831, AT&T sought damages equivalent to
Ryder's MARC for the three year life of the contract tariff while
under the early service termination provision in Tariff No. 1,
Ryder would be responsible for one month's charges from the date
that AT&T received Ryder's letter of July 24, 1997 terminating
service. Id. at 9. The parties dispute whether the Court
correctly assessed the difference between the amounts due under
the early service termination provisions in CT 6831 and in Tariff
No. 1. See Answer at 51, n.62; Reply Brief of Ryder
Communications Regarding the Application of Res Judicata, Inc.,
File No. EB-02-MD-038 (filed Mar. 26, 2003) at 13-16. For
purposes of this proceeding, we will assume that the Court's
calculation of the early service termination charges is correct.
49 Complaint, Ex. E-2 (Post-Trial Order) at 10.
50 Complaint, Ex. E-2 (Post-Trial Order) at 10.
51 Complaint, Ex. E-2 (Post-Trial Order) at 11. See id.
(``...AT&T is granted judgment as a matter of law with respect to
liability on its counterclaim against Ryder Communications, Inc.
This case, however, is referred to the F.C.C. for determination
of the appropriate measure of damages on AT&T's counterclaim.'');
Answer, Ex. 24 (Partial Judgment, Case No. 99-6688-CIV-
HIGHSMITH, Jan. 31, 2001, U.S.D.C., Southern District of Florida)
(``Partial Judgment Order'') at 1(``Pursuant to the doctrine of
primary jurisdiction and this Court's post-trial order, damages
for Ryder Communication, Inc.'s breach shall be determined by the
Federal Communications Commission'').
52 The parties first discussed the District Court's referral
order with Commission staff in late 2001, but those discussions
ended, and neither party contacted Commission staff again until a
procedurally insufficient version of the Complaint was filed on
November 26, 2002.
53 Complaint at 17, ¶¶ 36-39 (Count II), and at Ex. D (Legal
Analysis) at 10, ¶¶ 26-27. See Reply at 32-37, ¶¶ 64-75.
54 Complaint at 17, ¶ 33-35 (Count I), and at Ex. D (Legal
Analysis) at 2-5, ¶¶ 5-12. See Reply at 37-42, ¶¶ 76-86.
55 Ryder's Complaint contained a third claim alleging that
enforcement of the early service termination penalty was an
unlawful tariff practice under section 201(b) of the Act.
Complaint at 18, ¶¶ 40-43. The parties later stipulated that
the third claim is withdrawn. Joint Statement at 27, ¶154.
56 Complaint, Ex. E-2 (Post-Trial Order) at 9-10.
57 Joint Statement at 27, ¶ 152.
58 See, e.g., Interexchange Competition Order, 6 FCC Rcd at
5897, 5899, 5902-03, ¶¶ 91, 103-04, 121, 126 (citing MCI Telecom.
Corp. v. FCC, 917 F.2d 30, 37-38 (D.C. Cir. 1990) (MCI v. FCC)(
holding that contract tariffs do not violate the Communications
Act).
59 Interexchange Competition Order, 6 FCC Rcd at 5902, ¶ 121.
60 See Answer at 72-74, ¶ 142-43, 146.
61 To avoid this kind of inefficiency in the future, we strongly
recommend that parties in a court proceeding who receive a
primary jurisdiction referral order that does not clearly define
the matter(s) to be brought to the Commission seek clarification
from the court before initiating Commission processes.
62 Our skepticism stems, in part, from the fact that, were we to
grant one or both of Ryder's claims, as presently framed, AT&T's
damages would likely diminish to zero, which would seem to
contradict the Court's own rulings that Ryder could not recoup
its early service termination payments as consequential damages
for AT&T's breach of the Billing Agreement. Thus, we suspect
that, if the Court expected the parties to present any question
other than the one addressed in Part III(A) above (and that is a
big ``if''), the Court may have meant the question of whether a
$1.6 million charge is unreasonable in amount, either in absolute
terms or in relation to the discounts afforded to Ryder or the
timing of Ryder's discontinuance within the three-year service
period. See Answer at 2. Ryder declined to present that
question in its Complaint, however.
63 Complaint, Ex. E-2 (Post-Trial Order) at 11, n.9.
64 We note that this is not a situation where a party makes
certain representations to the court, and then, upon referral,
makes contrary representations to the Commission. Compare Haxtun
Telephone Company v. AT&T Corp., Memorandum Opinion and Order,
15 FCC Rcd 14895, 14898-902, ¶¶ 11-20 (Enf. Bur. 2000), aff'd,
Order on Review, 15 FCC Rcd 25260 (2000).
65 Complaint at 6-7, 9-13, 17, ¶¶ 12-13, 16-24, 36-39, and at
Ex. D (Legal Analysis) at 1-2, 5-6, 9-10, ¶¶ 12-13, 23-24, 26-27;
Reply at 10-15, ¶¶ 14-22.
66 Complaint at 11-12, 14-16, ¶¶ 20, 27, 31, and at Ex. D (Legal
Analysis) at 1, 3, 5-6, 9 ¶¶ 1, 8, 11-13, 24, 26-27; Reply at
27, 32-37, ¶¶ 53, 64-75.
67 Complaint at 11-12, 16-17, ¶ 20-22, 31, 36-39; Ex. D (Legal
Analysis) at 2-5, ¶¶ 5-12; Reply at 32-37, ¶¶ 64-75.
68 We note at the outset that, because Ryder did not assert a
claim for relief alleging the unlawfulness of CT 6831's early
service termination provision (either facially or as applied) in
its Court Complaint, AT&T raises here compelling affirmative
defenses of statute of limitations and claim preclusion (i.e.,
res judicata). Answer at 27, 54-67, ¶¶ 49, 112-32; AT&T Res
Judicata Brief at 1-12. Moreover, neither the jury nor the Court
found that AT&T's breach of the Billing Agreement proximately
caused Ryder to go out of business, Joint Statement at 11, ¶ 63,
Answer at 107-08, 115, ¶¶ 211, 225, and Ryder presents little
probative evidence of such causation here. Complaint at 7, 11,
¶¶ 13, 20, and at Ex. H (Ryder Affidavit) at 4-7, ¶¶ 25-34; Reply
at 14-15, ¶ 22; contra Answer at 21, 107-08, ¶¶ 20, 211. Because
our conclusions against Ryder rest on other grounds, however, we
need not and do not reach these issues.
69 Complaint at 3-5, 9, ¶¶ 7, 9, 16; Reply at 9, ¶ 11 (``The
issues raised in this proceeding involve two specific
interrelated and interdependent agreements, which were presented
to Ryder as a package deal. . . . These agreements were symbiotic
and worked in concert to support the single business relationship
between the parties....''); Reply at 11-12, ¶ 16 ( noting ``the
interrelatedness of the parties' agreements''); Joint Statement
at 13-14, 15 ¶¶ 83-84, 91 (Complainant's separate statement of
disputed facts).
70 Answer at 7, 76-77, 101, ¶¶ 151, 199.
71 Answer, Ex. 32 (Billing Services Agreement) at ¶ 12,
``Tariffed Services.''
72 Answer, Ex. 32 (Billing Services Agreement) at ¶ 18(G),
``General;'' Answer, Ex. 8 (Partial Summary Judgment Order) at 3-
5.
73 Answer, Ex. 8 (Partial Summary Judgment Order) at 4-5.
74 Indeed, at one point in its pleadings, Ryder appears to
concede that it cannot use AT&T's breach of the Billing Agreement
to avoid liability for the early service termination charge.
Reply Brief of Ryder Communications, Inc. Regarding the
Application of Res Judicata, File No. EB-02-MD-038 (filed Mar.
26, 2003) (``Res Judicata Reply Brief''), at 2 (``Ryder does not
contend that `it should be allowed to use AT&T's breach of the
BSA (billing service agreement) to avoid liability for the
termination charges due under the discontinuance provision of CT
6831.' Rather, Ryder asserts ...that AT&T's actions - as a whole
- were so harmful and derelict that to permit a carrier to
recover a termination penalty under these circumstances would be
unjust and unreasonable, in contravention to the Act and
Commission orders...''). We fail to see, on this record, how
Ryder's referral to AT&T's actions ``as a whole'' could refer to
anything other than AT&T's breach of the Billing Agreement. In
fact, Ryder summarizes its entire case by requesting that the
Commission find that ``AT&T, through its failure to fulfill its
obligations and sustained erroneous billing, acted unreasonably
in its creation of the very situation from which it now hopes to
profit.'' Complaint at 12, ¶ 20.
75 See, e.g., American Telephone and Telegraph v. Central Office
Telephone, 524 U.S. at 221-27.
76 See, e.g., Reply at 32, ¶ 65 (``The Commission should reject
the argument AT&T has offered; that simply because the law
recognizes the existence of a discontinuance provision, that it
should be free to impose it without condition or consideration of
its own actions.''). See also Reply at 4, 36-37, ¶¶ 74-75; Ryder
Res Judicata Brief at 2 (both stating generally that the
Commission need not disturb the findings of the Court, but must
still find that the harm inflicted by AT&T makes enforcement of
the early service termination provision unreasonable).
77 Reply at 25-32, ¶¶ 46-63 (citing Federal Power Commission v.
Sierra Pacific Power Co., 350 U.S. 348 (1956); United Gas
Pipeline Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956);
IDB Mobile Communications, Inc. v. COMSAT Corp., Memorandum
Opinion and Order, 16 FCC Rcd 11,474 (2001) (``IDB v.
COMSAT'')).
78 See, e.g., IDB v. COMSAT, 16 FCC Rcd at 11480-81, ¶¶ 14-15
(and cases cited therein). We reference the principles of the
Sierra-Mobile doctrine because the Commission has never squarely
held that the doctrine applies to contract tariffs between a
carrier and a non-carrier, as opposed to a contract or contract
tariff between a carrier and another carrier. Nevertheless, as
the parties each assert (Answer at 102-07, ¶¶ 201-10; Reply at
25-32, ¶¶ 46-63), we see no reason why the principles underlying
the doctrine should not have similar, if not equal, applicability
in both contexts. See Global Access Limited v. AT&T Corp., 978
F. Supp. 1068 (S.D. Fla. 1997) (holding that the Sierra-Mobile
doctrine applies to contract tariffs between carriers and non-
carriers). Thus, without actually holding that the Sierra-Mobile
doctrine governs, we examine the facts here in light of Sierra-
Mobile principles, as both parties urge us to do. Answer at 103-
07, ¶¶ 203-210; Reply at 26-29, ¶¶ 50-56. Cf. Echostar
Communications Corporation v. Fox/Liberty Networks LLC,
Memorandum Opinion and Order, 13 FCC Rcd 21841, 21849, ¶ 20 (Cab.
Serv. Bur. 1998) (finding, independent of the Sierra-Mobile
doctrine, that public policy requires minimal regulatory
interference with private contracts entered into by consenting
parties); Petition of WorldCom, Inc. Pursuant to Section
252(e)(5) of the Communications Act for Preemption of the
Jurisdiction of the Virginia State Corporation Commission
Regarding Interconnection Disputes with Verizon Virginia Inc.,
and For Expedited Arbitration, et al., Memorandum Opinion and
Order, 17 FCC Rcd 27039, 27206, ¶ 348 (Com. Car. Bur. 2002)
(declining to invalidate the early service termination provisions
contained in Verizon's special access tariffs, and noting that
AT&T had voluntarily purchased special access services pursuant
to Verizon's filed tariff and took advantage of discount pricing
plans that offered lowered rates in return for a longer
commitment).
79 IDB v. COMSAT, 16 FCC Rcd at 11480, ¶ 15 (and cases cited
therein).
80 See, e.g., IDB v. COMSAT, 16 FCC Rcd at 11480-81, ¶ 16 (and
cases cited therein).
81 Complaint at Ex. H (Affidavit of David Ryder) (``Ryder
Affidavit'') at 3, ¶¶ 19-20; Reply at 12, 28, ¶¶ 17, 54, Joint
Statement at 15, ¶¶ 92, 95 (Complainant's Disputed Facts).
82 Answer at 105-06, ¶ 206, and at Ex. 40 (Decl. of Laurie B.
Brown, File No. EB-02- MD-038, filed Feb. 3, 2003) (``AT&T Brown
Decl.'') at 1-2.
83 Answer at 72-74, 105-07, ¶¶ 142-43, 146, 206, 209, and at Ex.
40 (AT&T Brown Decl.) at 1-2. See also Joint Statement at 4, ¶
20 (``CT 6831 provided that in exchange for receiving volume
discounts from AT&T, Ryder committed to take MultiQuest 900
service from AT&T for a period of three years, and to pay AT&T at
least a Minimum Annual Revenue Commitment of $600,000 for each
year of the term.'') (emphasis added).
84 In fact, at least two federal courts of appeals have
expressed skepticism about the relevance of uneven bargaining
power in Sierra-Mobile analysis. IDB v. COMSAT, 16 FCC Rcd at
11486, n.70 (and cases cited therein).
85 Reply at 27-29, 31-32, ¶¶ 53-56, 62-63.
86 Answer at 99-100, ¶¶ 195-96; Supplemental Answer at 24, ¶ 58.
87 Complaint at 3-5, 9 ¶¶ 7, 9, 16; Reply at 9, ¶ 11 (``The
issues raised in this proceeding involve two specific
interrelated and interdependent agreements, which were presented
to Ryder as a package deal. . . . These agreements were symbiotic
and worked in concert to support the single business relationship
between the parties...''); Reply at 11-12, ¶ 16 (``As evidenced
by the interrelatedness of the parties' agreements, Ryder
Communications was dependent on AT&T's performance of its
contractual obligations in order to conduct its business.
Ryder's ability to offer 900 number service to customers, pay for
the communications transport, and receive monies for those
services, was dependent upon AT&T fulfilling all of its
contractual obligations.''); Joint Statement at 13-14, 15 ¶¶ 83-
84, 91 (Complainant's separate statement of disputed facts).
88 Although the parties usually refer to a single billing
agreement, they both acknowledge (as did the Court) that they
actually entered into a series of agreements pertaining to
billing matters. Reply at 9, 12, n.42-43; Answer at 107, n.127;
Joint Statement at 6, ¶¶ 31-32; Complaint, Ex. E-2 (Post-Trial
Order) at 2, n.1. Thus, Ryder had numerous opportunities over
the years to seek a different allocation of the risk of a breach
by AT&T.
89 Answer at 106, ¶ 208.
90 Reply at 4 (``...neither the Court nor Ryder have asked the
Commission to engage in any review, or to make any determinations
with regard to issues that have already been decided by the
Court, or that are subject to appeal, such as the jury
instructions or application of New Jersey's `willful and wanton'
standard.''). See Reply at 36-37, ¶¶ 74-75.
91 Complaint at 17, ¶¶33-35, and at Ex. D (Legal Analysis) at 3-
5, ¶¶ 8-12; Reply at 37-42, ¶¶ 76-86.
92 See, e.g., Southwestern Bell Telephone Company Tariff F.C.C.
No. 68, Tr. No. 1921, Order, 5 FCC Rcd 2523 (Com. Car. Bur. 1990)
(``SWB Tr. No. 1921 Order''); Southwestern Bell Telephone Company
Tariff F.C.C. No. 68, Tr. No. 1963, Order, 5 FCC Rcd 3790 (Com.
Car. Bur. 1990) (``SWB Tr. No. 1963 Order'') (both allowing five
year service contract containing early service termination
provision that required the customer to pay charges as if minimum
volume commitment would be met, minus Southwestern Bell's
interstate special access authorized rate of return at the time
of the termination); AT&T Communications Revisions to Tariff
F.C.C. No. 1, Tr. No. 2422, Order, 5 FCC Rcd 5988 (Com. Car. Bur.
1990) (``AT&T Tr. No. 2422 Order'') (allowing long term service
plans that required customers who discontinued service prior to
the end of the plan to pay shortfall charges for the remainder of
the term, and also required repayment of the discounted amounts
customers paid for years in which they actually purchased
service); AT&T Communications Tariff F.C.C. Nos. 2 and 14, Tr.
Nos. 4974, 5149, and 5383, Order, 8 FCC Rcd 4543 (Com Car. Bur.
1993 (``AT&T Tr. No. 4974 Order'') (allowing 800 service term
plans containing early service termination provisions that
required customers who discontinued service prior to the end of
the plan to pay charges based on a percentage of the remaining,
unfulfilled commitments). See also Telecom International
America, Ltd. v. AT&T Corp., 67 F. Supp.2d 189, 219-221 (S.D.N.Y.
1999), aff'd in part, rev'd in part on other grounds, 280 F.3d
175, 189-90, 193 (2nd Cir. 2001) (upholding the validity of a
shortfall provision that obligated the customer to pay
termination charges if it failed to purchase a minimum amount of
communications services during the three year term of the
contract tariff).
93 See, e.g., SWB Tr. No. 1921 Order, 5 FCC Rcd at 2523, ¶ 1;
SWB Tr. No. 1963 Order, 5 FCC Rcd at 3790, ¶ 1; AT&T Tr. No. 2422
Order, 5 FCC Rcd at 5988, ¶ 2 ; AT&T Tr. No. 4974 Order, 8 FCC
Rcd at 4543, n.4-5. See also Telecom International v. AT&T
Corp., 67 F. Supp.2d at 219-221. Ryder has emphasized that its
complaint does not dispute the actual amount of the termination
charges required under the early service termination provision in
CT 6831. Reply at 33, ¶ 67.
94 See, e.g., Interexchange Competition Order, 6 FCC Rcd at
5902, ¶ 121; SWB Tr. No. 1921 Order, 5 FCC Rcd at 2523, ¶ 1; SWB
Tr. No. 1963 Order, 5 FCC Rcd at 3790, ¶ 1; AT&T Tr. No. 2422
Order, 5 FCC Rcd at 5988, ¶ 2 ; AT&T Tr. No. 4974 Order, 8 FCC
Rcd at 4543, n. 4-5. See also Telecom International v. AT&T
Corp., 67 F. Supp.2d at 219-221.
95 See generally 800 Presubscription Rules for 800 Providers and
Responsible Organizations, Order, 8 FCC Rcd 7315, 7317, ¶ 18
(Com. Car. Bur. 1993).
96 Complaint, Ex. E-6 (CT 6831) at Section 1, ``Services
Provided;'' Answer, Ex. 28 (Tariff No. 1) at Section 2.3.1,
``Liability.'' Ryder does not dispute that CT 6831 incorporates
this section of Tariff No. 1.
97 See Complaint, Ex. D (Legal Analysis) at 5, ¶ 12; Reply at
40, ¶ 83.
98 Complaint at 14-16; ¶¶ 25-30, and at Ex. D (Legal Analysis)
at 7-10, ¶¶ 19-27; Reply at 37-42, ¶¶ 77-86.
99 See generally 47 U.S.C. § 203.
100 Complaint, Ex. D (Legal Analysis) at 4-5, ¶¶ 9-10 (citing
Local Exchange Carrier Line Information Database, CC Docket No.
92-24, Order, 8 FCC Rcd 7130, 7134-35, ¶¶ 27 (1993) (allowing
local exchange carriers to maintain general limitation of
liability provisions that do not shield them from liability for
willful misconduct or gross negligence for incorrect calling card
validations); Annual 1985 Access Tariff Filings, Memorandum
Opinion and Order, 2 FCC Rcd 1416, 1423-24, ¶¶ 66-72 (1987)
(requiring local exchange carriers to apply their general
liability provisions holding them responsible for willful
misconduct or gross negligence for presubscription errors, and
declining to require them to modify their general liability
provisions to ensure that they do not disclaim liability for
ordinary negligence for assigning an end user to the wrong
interexchange carrier); UNIMAT, Inc. v. MCI Telecom. Corp.,
Order, 14 FCC Rcd 7829, 7835, ¶ 14 (Com. Car. Bur. 1999) (noting
that an otherwise reasonable limitation of liability clause that
addresses the carrier's liability for mis-dialed toll-free calls
will not shield the carrier from liability under the
reasonableness standard of the Act in the case of willful
misconduct or gross negligence by its employees or agents)).
See Reply at 39-40, ¶ 82.
101 Complaint, Ex. D (Legal Analysis) at 4-5, ¶¶ 9-11; Reply at
39-40, ¶ 82.